Web Stock Guru Turns Bullish on Internet
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Related StoriesBy Daniel F. DeLong
www.NewsFactor.com,
Part of the NewsFactor Network
February 16, 2001
A number of respected market analysts have followed Henry Blodget's lead, turning bullish on Internet stocks despite the shuttering of many online ventures over the past year.
In This Story:
Bullish For Weeks
Fewer Choices For Ad Buys
Renewed Customer Focus
Cuts and Consolidations
Related Stories
With about 200 Internet companies having been shuttered in the past year and more than 50,000 jobs lost, the time has come for investors to reconsider some online stocks -- or so says Henry Blodget, once considered the guru of Web-based companies' stocks.
The Merrill Lynch analyst, who made his name by predicting in December 1998 that shares of Amazon.com (Nasdaq: AMZN) would top US$400, only to see them crash and burn, is again forecasting better days for the industry.
Blodget specifically recommended some Internet media companies for risk-tolerant investors, alleging that the dreaded online advertising crunch has hit rock bottom and saying he expects conditions to improve over the remainder of the year.
The difference this time is that Blodget is not alone. In fact, he's not even the first to forecast brighter days.
Bullish For Weeks
A number of analysts have been bullish for weeks on stocks such as AOL Time Warner (NYSE: AOL), Yahoo! Inc. (Nasdaq: YHOO), Homestore.com (Nasdaq: HOMS), DoubleClick Inc. (Nasdaq: DCLK) and GoTo.com (Nasdaq: GOTO).
"We look at our recommendations over the course of the entire year," Kathleen Heaney, an analyst at Bluestone Capital, told NewsFactor Network.
"I recently put a buy target on Yahoo! after watching the fallout and considering the options," Heaney said.
Fewer Choices For Ad Buys
Heaney said that it isn't a matter of the advertising climate picking up for the big Internet companies; there are simply fewer choices for advertising agencies this year, compared with 2000.
"Everyone will pick up market share, based on what has happened during the past few months," Heaney contended.
Scott B. Davis, an analyst at First Union Securities Inc., has been bullish on AOL since before its $1.6 billion merger with Time Warner. Davis told NewsFactor that the merged company is a powerful competitor, and will only get better as the year moves on and advertisers loosen their purse strings.
Despite some embarrassing picks, Blodget apparently still has many fans. After making his upbeat forecast, shares of AOL, Yahoo! and Homestore.com all posted gains. However, DoubleClick and GoTo.com each lost ground.
"Although there is still significant risk in these stocks, we actually believe the risk/reward profit is better than it has been in more than two years," Blodget said in a research note.
Renewed Customer Focus
Blodget said the media buyers he had surveyed cited renewed focus on customer satisfaction by the leading sites, which he found encouraging.
Another company Blodget mentioned as gaining market share was Microsoft (Nasdaq: MSFT), and its MSN portal. But last week he lowered his long-term rating on the company to accumulate from buy, saying he wasn't sure how far the giant software maker was willing to go to support MSN. The stock hasn't budged since his downgrade.
The decline in online advertising spending has caused a number of companies to temper their near-term growth projections, and has led others to retrench.
Cuts and Consolidations
Despite the generally bullish outlook, financial news network CNBC recently said it would cut its staff by 4 percent and its CNBC.com online operation by 26 percent as part of a company-wide effort to remain profitable.
The staff cut came a week after CNBC said it would fold CNBC.com into the television network, and follows similar moves by other media companies, including AOL Time Warner's CNN consolidation and the Walt Disney Company's (NYSE: DIS) decision to shut down Go.com, its money-losing Internet portal.
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